Key Takeaways
- Cyber insurance can help cover both the direct and indirect expenses associated with an incident — including business interruption, reputational damage, and ransomware — but coverage requires a lot of documentation.
- Underwriters will do a "wellness check" of your organization when you apply for cyber insurance before accepting you as a client.
- Proactive planning and testing of your security posture, understanding how cyber insurance fits into a larger, multi-prong cybersecurity strategy, and exploring the right coverage needs for your organization is recommended.
With the average total cost of a data breach reaching $4.45 million in 2023, organizations of all sizes are looking for ways to protect against and respond to cybersecurity attacks. In fact, over half of victim organizations choose to increase security spending after a breach, with 18% putting money towards cyber insurance.
Qualifying for a Cyber Insurance Policy
Choosing the right cybersecurity insurance policy includes understanding factors like the type of data you have and its value, notification requirements you must comply with, and specific risks others in your industry have reported.
But it’s important to note that coverage is not a guarantee. Underwriters will do a "wellness check" of your organization when you apply for cyber insurance. You may not qualify for a policy if you do not meet the following controls:
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Multi-Factor Authentication
Multi-Factor Authentication (MFA) is a robust security measure that ensures the identity of users by requesting multiple forms of authentication. For instance, a password and a biometric can be required to access a system or sensitive data. Organizations should enforce MFA for accessing sensitive systems, networks, and applications.
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Security Awareness Training & Testing
This involves educating employees about cybersecurity best practices to recognize and prevent potential threats. Employees are the first line of defense against cyberattacks, so it’s important to develop comprehensive cybersecurity training programs for staff. Cover topics such as recognizing phishing attempts, secure password practices, and social engineering awareness.
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Separate Backups
Having separate and secure data backups is a key aspect of data recovery. Insurance companies assess whether organizations maintain offsite or segregated backups, which can be critical for data restoration in case of an incident. We encourage you to develop and document clear backup policies that include the frequency of backups, types of data to be backed up, and the storage location.
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Endpoint Detection & Response
Endpoint Detection and Response (EDR) solutions monitor and respond to suspicious activities. Organizations should work to implement EDR solutions on all endpoints, including computers, servers, and mobile devices. Ensure these solutions provide real-time monitoring and response capabilities.
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Vulnerability Management
This refers to identifying, assessing, and responding to security vulnerabilities in an organization's IT infrastructure. In order to qualify for coverage, it’s important to conduct regular vulnerability scans on your organization's IT infrastructure. Prioritize and address high-risk vulnerabilities promptly.
Regardless of whether you invest in cyber insurance coverage, it's encouraged to evaluate your organization's security stance through a lens of these five essential control areas. These are fundamental components of any robust cybersecurity strategy. Gaining insights into your organization's position in these areas is pivotal for charting a course forward and making informed decisions to enhance your overall security posture.
If your policies and procedures make you an acceptable risk for insurance carriers, they also reduce the risk of an attack.
If you're not sure where you stand in these areas, consider working with cybersecurity professionals who can conduct control testing to see if you meet the requirements and help you fill in any gaps.
Cyber Insurance as a Risk Management Strategy
The cyber insurance market is expanding as more industries opt for coverage to mitigate risks. While cyber insurance shouldn't be your only strategy in defending against cyberattacks, remember that you won't be able to purchase a policy when you're in the midst of an incident.
Proactively securing cybersecurity insurance can provide several benefits, including:
Cyber insurance can help you recover financially from a breach.
Costs associated with cyberattacks can be substantial. Cyber insurance can help cover direct expenses, like hiring professionals to investigate the breach, restoring compromised systems, and notifying affected individuals or businesses. Depending on your policy, it may also assist with the indirect fees of a breach, including:
- Business Interruption: When a cyberattack disrupts your operations, it can lead to significant revenue loss. Cyber insurance can cover the income you lose during downtime, which is crucial for small and medium-sized organizations that cannot endure prolonged interruptions.
- Reputational Damage: A data breach can negatively impact your organization's reputation, leading to decreased customer trust and a loss of future business. Cyber insurance may include coverage for public relations and marketing efforts to navigate the aftermath effectively.
- Ransomware: Ransomware insurance claims hit a record high in the first half of 2023. In ransomware attacks, where cybercriminals demand a ransom to restore access to your data, cyber insurance can help cover the ransom payment.
Insurance policies can help limit your legal liability.
Cyber insurance policies often come with access to legal professionals who specialize in data breaches. Their expertise can provide invaluable support in the event of an incident.
For example, breach attorneys can guide you through the legal complexities of a cyberattack. They can help you understand your obligations under relevant data protection laws and ensure you adhere to notification requirements, deadlines, and other legal obligations.
Your insurance policy may cover legal expenses for defending against claims, settlements, or judgments resulting from a data breach.
Carriers often have valuable relationships with security resources.
Cyber insurance carriers often have established relationships with trusted cybersecurity firms, like Eide Bailly. These relationships offer several advantages when looking at the broader picture of your organization’s security posture:
- Access to Expertise: Carriers can connect you with cybersecurity professionals who can assess your organization's security posture, identify vulnerabilities, and recommend measures to reduce your risk.
- Risk Mitigation: By leveraging these relationships, you can access security solutions and services that help reduce your organization's attack surface. These solutions might include penetration testing, threat intelligence, and cybersecurity training for your staff.
- Regulatory Compliance: Engaging with these security professionals can also help ensure your organization complies with industry-specific regulations and standards.
Navigate Cybersecurity Complexities with the Help of Experienced Professionals
While cybersecurity insurance can play an important role in incident recovery, it’s only one piece of a comprehensive security strategy. Working with cybersecurity professionals can help you understand your risks, fill any security gaps, and ensure you’re positioned to properly prevent, detect, and recover from a breach.
Cybersecurity
Eide Bailly’s cybersecurity team provides guidance, strategic direction, and prioritization of business objectives and cyber risks.
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Eide Bailly is a CPA and business advisory firm helping our clients grow, thrive, and embrace opportunities and innovation.
